Voluntary climate action and credible regulatory threat: evidence from the carbon disclosure project

This paper examines the role that the U.S. Environmental Protection Agency’s introduction of the Clean Power Plan played in voluntary carbon disclosure by the Global 500 firms during 2011–2015. Results from difference-in-difference-in-differences estimators nested in a two-stage endogenous binary-variable model—which accounts for the correlation between a firm’s participation and intensity of participation—show that U.S.-based firms acted preemptively in anticipation of a more stringent regulatory environment. Regardless of country of origin, among firms making voluntary disclosures, the Clean Power Plan was associated with higher levels of carbon disclosure in firms with favorable management structures and practices involving the agency of corporate management, ceteris paribus. Empirical analysis includes controls for firm size, natural gas prices, sector-specific market pressures, and macro-economic and political economy dynamics. Results are robust to alternative specifications, including a trimmed matching sample, the Heckman selection model, and sector-specific regressions.